2023 Economic Recession Will Be Milder Than Predicted: Former Chief Economist

A screen displays financial news on the floor at the New York Stock Exchange in New York on Dec. 29, 2022. (Seth Wenig/AP Photo)

Despite alarming messages of high unemployment and a looming devastating recession, economic markers show any recession will be “more mild” than previously thought, Thomas Hogan stated in an interview, which aired on Newsmakers by NTD and The Epoch Times on Jan. 4.

Hogan is currently a senior research faculty at the American Institute for Economic Research (AIER) and was formerly the chief economist for the U.S. Senate Committee on Banking, Housing, and Urban Affairs.

“My outlook [on the U.S. economy] is not terribly pessimistic,” Hogan said. “I think it’s possible that if we do have a recession—which appears likely, but we might possibly avoid it—if we do have one, hopefully, it will be relatively mild. And that’s a much more positive outlook than we were seeing just a few months ago.”

The entrance to JPMorgan Chase & Co.’s headquarters in Manhattan. (Spencer Platt/Getty Images)

Referring to a survey from Bloomberg, Hogan said he’s not alone in his belief. According to the results, 70 percent of the economists surveyed agreed that a “mild” recession is likely.

And citing a report from the Wall Street Journal, which surveyed 23 large financial institutions and found two-thirds expected the U.S. economy to contract, Hogan said the financial institutions that believe a “contraction” is likely, reported the contraction as mild.

Positive Economic Markers

According to Hogan, there are several factors positively impacting the economy. The first is that inflation appears to have stabilized or, depending on the report, has started to decline. And the second factor is that people’s perception of inflation is more positive.

“Importantly, people’s expectations of inflation have started to decline,” Hogan stated. “There was a big worry that people would start expecting high inflation, year after year after year. And that doesn’t appear to be the case. Most Americans seem to think the economy is getting back to normal.”

A sign proclaims "Now Hiring" at a Home Depot store in San Rafael, Calif., on Aug. 5, 2022. (Justin Sullivan/Getty Images)

Further, while some financial institutions predict unemployment will reach five percent in the coming year, Hogan pointed out that five percent is below average.

“On the employment side … people are saying that there’s going to be a recession. But they’re really only predicting unemployment going up to about 5 percent, which is bad, we don’t want anyone to lose their jobs. But the long run average in the United States is about six percent,” Hogan said.

Plus, Hogan said even if unemployment reaches five percent, that’s much lower than predicted just a few months ago.

Negative Economic Markers

Hogan said he believes the U.S. economy won’t experience a significant recession, but he did acknowledge negative economic trends that could prove problematic. Specifically, he cited Congress and its spending habits as cause for concern.

U.S. House Minority Leader Kevin McCarthy (R-Calif.) (C) sits among colleagues as Representatives cast their votes for Speaker of the House on the first day of the 118th Congress in the House Chamber of the U.S. Capitol Building in Washington on Jan. 3, 2023. (Win McNamee/Getty Images)

“[Congress has] been basically doing too much the last few years, you know, they’ve been spending a lot. And that’s increased our debt,” Hogan said. “And in the long run, that’s going to be a very big factor, that they had been potentially spending money, you know, too much money and too much on things that weren’t really necessary.”

Hogan said that if Congress could “rein in their spending,” that would help the economy. He added that Congress cutting regulations on business would also have a positive effect.

Unknown Economic Factors

Regarding economic impacts that could go either way, Hogan pointed to foreign influences and the United States divided government.

Hogan said he believes the United States has successfully “passed through the initial part of Russia’s war with Ukraine, where a lot of American businesses had to pull out from Russia,” but added that that war is still ongoing and could have further repercussions.

A bigger question, Hogan believes, is China. “China’s had this big slowdown because of their serious COVID policies,” Hogan said. “And that’s harmed a lot of American producers that get some of their goods from China. And so, it'll be interesting to see what happens with them.”

The view from behind a barrier of a sealed area, amid new lockdown measures in parts of the city in Shanghai on July 11, 2022. (Aly Song/Reuters)

Hogan added about Congress, “We’ve got a brand-new Congress, and we'll have to see what their domestic agenda is.

“It’s a divided Congress now with the Republicans controlling the House and the Democrats controlling the Senate. And so probably not as much spending and, you know, hopefully, that will allow the economy to grow this year better than we’ve been or continue [what] we’ve been doing in the past.”

Finally, Hogan added that though the U.S. Federal Reserve helped drive high inflation with its economic policies, it has admitted its faults and managed interest rates effectively. Thus, if a more severe recession emerges, the FED could cut interest rates to stimulate the economy.

“If we do head towards a recession, it seems likely that the FED will probably be in a good enough situation to be able to cut interest rates and respond and try to stimulate the economy to get us towards the normal growth path,” Hogan stated.